Correlation Between Daiyang Metal and KMH Hitech
Can any of the company-specific risk be diversified away by investing in both Daiyang Metal and KMH Hitech at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Daiyang Metal and KMH Hitech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daiyang Metal Co and KMH Hitech Co, you can compare the effects of market volatilities on Daiyang Metal and KMH Hitech and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Daiyang Metal with a short position of KMH Hitech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daiyang Metal and KMH Hitech.
Diversification Opportunities for Daiyang Metal and KMH Hitech
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Daiyang and KMH is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Daiyang Metal Co and KMH Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMH Hitech and Daiyang Metal is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Daiyang Metal Co are associated (or correlated) with KMH Hitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMH Hitech has no effect on the direction of Daiyang Metal i.e., Daiyang Metal and KMH Hitech go up and down completely randomly.
Pair Corralation between Daiyang Metal and KMH Hitech
Assuming the 90 days trading horizon Daiyang Metal Co is expected to generate 2.26 times more return on investment than KMH Hitech. However, Daiyang Metal is 2.26 times more volatile than KMH Hitech Co. It trades about -0.01 of its potential returns per unit of risk. KMH Hitech Co is currently generating about -0.02 per unit of risk. If you would invest 340,500 in Daiyang Metal Co on November 9, 2024 and sell it today you would lose (190,500) from holding Daiyang Metal Co or give up 55.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.95% |
| Values | Daily Returns |
Daiyang Metal Co vs. KMH Hitech Co
Performance |
| Timeline |
| Daiyang Metal |
| KMH Hitech |
Daiyang Metal and KMH Hitech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daiyang Metal and KMH Hitech
The main advantage of trading using opposite Daiyang Metal and KMH Hitech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daiyang Metal position performs unexpectedly, KMH Hitech can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in KMH Hitech will offset losses from the drop in KMH Hitech's long position.| Daiyang Metal vs. PJ Electronics Co | Daiyang Metal vs. Daeduck Electronics Co | Daiyang Metal vs. PJ Metal Co | Daiyang Metal vs. SungMoon Electronics Co |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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